NZD/USD holds losses near 0.5850 on mixed Chinese data, US CPI looms
- NZD/USD declines to around 0.5855 in Friday’s Asian session.
- Chinese CPI rose 1.0% YoY in March, softer than expected; PPI climbed more than expected.
- The US March CPI inflation data will be closely watched later on Friday.
The NZD/USD pair edges lower to near 0.5855 during the Asian trading hours on Friday. The New Zealand Dollar (NZD) remains weak against the US Dollar (USD) after mixed Chinese economic data. The attention will shift to the US inflation report later on Friday.
Data released by the National Bureau of Statistics of China on Friday showed that China’s Consumer Price Index (CPI) increased 1.0% YoY in March, compared to a rise of 1.3% in February. This figure came in softer than the estimations of 1.2%. On a monthly basis, Chinese CPI inflation arrived at -0.7% in March, versus a rise of 1.0% prior, softer than the expectation of a 0.2% decline.
Additionally, China’s Producer Price Index (PPI) rose 0.5% YoY in March, following a 0.9% fall in February. The reading came in above the market consensus of a 0.4% increase. However, these mixed reports have little to no impact on the China-proxy Kiwi.
The US March Consumer Price Index (CPI) inflation report will be the highlight on Friday. The headline CPI is projected to see a rise of 3.3% YoY in March, compared to 2.4% in February, driven by soaring oil prices due to the Middle East war. Meanwhile, the core CPI is expected to see an increase of 2.7% in March, versus 2.5% prior. In case of a softer-than-expected outcome, this could weigh on the USD against the NZD.
Escalating tensions and uncertainty in the Middle East could boost a safe-haven currency such as the Greenback. US President Donald Trump accused Iran of doing a "very poor job" of handling oil through the Strait of Hormuz. Trump added that he expects Iran to comply with terms he says were agreed on for a ceasefire ahead of planned negotiations this weekend, warning that if it doesn't, he'll order large-scale attacks on the country.
US Vice President JD Vance and senior envoys Steve Witkoff and Jared Kushner are scheduled for talks in Pakistan on Saturday on a potential long-term deal with Iran.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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